HiFX Morning Update, May 2 2018

The NZDUSD opens at 0.6995 (mid-rate) this morning.

The USD continues to climb ahead of tomorrow morning's FOMC monetary policy statement. The US Dollar index (DXY) which measures the value of the USD against a basket of currencies, is threatening to break up through its 2018 high of 92.64, peaking earlier this morning at 92.57.

The USD pulled back from its highs after this morning’s US economic data releases disappointed. The ISM reported its Purchasing Managers’ Index dropped to 57.3 in April from 59.3 in March. Economists had expected the index to inch down to 58.3. Construction spending confounded economists who had forecast spending to increase by 0.5% in March, with the Commerce Department reporting spending fell by 1.7% to an annual rate of $1.285 trillion.

The GBP is the worst performing of the G10 currencies as once again their economic data disappointed. Last night survey data from IHS Markit showed UK manufacturing activity expanded at the slowest pace in 17 months in April. The Purchasing Managers' Index which had been expected to edge down to 54.8 from a 5.9 reading in March plummeted to 53.9 leading to a sharp fall in the pound.

Yesterday’s RBA monetary policy statement held few surprises and as such has had little effect on the NZDAUD cross rate. The key driver for the NZD will be this morning’s quarterly employment report. Economists are forecasting unemployment to edge down to 4.4% from 4.5% in Q4, while the Labour Cost Index is expected to inch up by 0.5% following a 0.4% increase in Q4.

Tomorrow mornings FOMC statement will be released at 6:00am.

Global equity markets are mixed- Dow -0.65%, S&P 500 -0.20%, FTSE +0.15%, DAX Closed CAC Closed, Nikkei +0.18%, Shanghai +0.23%.

Gold prices are down 1.0%, trading at $1,305 an ounce. WTI Crude Oil prices are sharply lower down 2.2% overnight currently trading at $67.14 a barrel.

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